McDonald's plans to offer more lower-priced menu items next year and launch them nationally in 2027, after its US comparable sales growth slowed, CEO Christopher Kempczinski told Wall Street analysts on Wednesday. The chain has launched an eight-week pilot of new affordable options at 1,900 US locations and is testing mix and match bundles to see which drive sales, he said.
The comments came after McDonald's earnings report, released the same day, showed comparable sales growth of 0.2% at US locations from July to September, down from 2.4% in the same period last year. Overall foot traffic at the chain's US stores was down 4.6% from a year earlier, according to data from analytics platform Placer.ai.
Kempczinski acknowledged that the company has not done enough to meet the expectations of low-income diners, who are looking for what he called great entry-level value. He told investors that in the second quarter the company did not get that right as needed, and that it is now working to resolve the issue through testing.
The comments came a day after the US midterms, where affordability concerns took centre stage. Many candidates campaigned on addressing cost-of-living issues and bringing down gasoline prices, which have risen 38% since the start of the war in Iran, according to AAA data.
US consumer spending has remained resilient despite inflation that remains above the Federal Reserve's 2% target. Economists note that lower-income consumers are feeling particularly strained because a larger share of their income goes toward expenses such as gas. Ryan Sweet, chief global economist at Oxford Economics, said on Wednesday during an event in New York City that low-income consumers are disproportionately feeling the effect of higher food and gasoline prices.
Analysis
Why This Matters
- McDonald's is a bellwether for US consumer demand, and its slowdown adds to evidence that lower-income households are cutting back as food and fuel costs stay high.
- The cheaper menu plans are a bet that value promotions can rebuild traffic after a weak quarter in the US.
- The national rollout targeted for 2027 means the results of the current tests will shape what customers see next year.
Background
McDonald's has for years competed in the US partly on value menus and promotions, and its sales trends are closely watched as a gauge of how far consumers are willing to spend. The company's latest results show that strategy under pressure, with traffic falling even as it tests new deals.
Key Perspectives
- Christopher Kempczinski, McDonald's CEO: says the company did not land the value it needed to in the second quarter and is working to resolve that through testing, with national launch targeted for 2027.
- Ryan Sweet, Oxford Economics: says low-income consumers are disproportionately bearing the effect of higher food and gasoline prices.
What to Watch
- Whether the eight-week pilot and bundle tests produce sales gains the company reports in its next quarterly update.
- The inflation and gas price figures cited by the company and analysts, which shape how much low-income customers can spend.
- Any change to the 2027 national launch timeline as test results come in.
Checked
12 claims in this story checked against 1 source: 12 supported.
Show each claim
- SupportedMcDonald's aims to launch its new lower-priced offerings nationally in 2027.Moneywatch - CBSNews.com: “McDonald's is aiming to launch the new offerings nationally in 2027, Kempczinski said.”
- SupportedUS comparable sales growth was 0.2% from July to September, down from 2.4% in the same period last year.Moneywatch - CBSNews.com: “showed comparable sales growth of only 0.2% at U.S. locations from July to September, down from 2.4% during the same period last year.”
- SupportedKempczinski said McDonald's had not done enough to meet low-income diners' expectations.Moneywatch - CBSNews.com: “Kempczinski acknowledged that the company has not done enough to meet the expectations of low-income diners”
- SupportedKempczinski described the value low-income diners seek as “great entry-level value.”Moneywatch - CBSNews.com: “who are looking for "great entry-level value."”
- SupportedMcDonald's has launched an eight-week pilot of affordable menu options at 1,900 US locations.Moneywatch - CBSNews.com: “recently launched an eight-week pilot program to test new affordable menu options at 1,900 U.S. locations.”
- SupportedMcDonald's is testing mix-and-match bundles to see which will drive sales.Moneywatch - CBSNews.com: “The company is also testing "mix and match bundles" to see which will drive sales, he said.”
- SupportedFoot traffic at McDonald's US stores was down 4.6% from a year earlier, according to Placer.ai data.Moneywatch - CBSNews.com: “Overall foot traffic at the chain's U.S. stores was down 4.6% from a year ago, according to data from analytics platform Placer.ai.”
- SupportedKempczinski told investors that in the second quarter McDonald's did not get its value offer right as needed, and said the company was working to resolve the issue through testing.Moneywatch - CBSNews.com: “"We talked quite extensively about how [in] Q2 we didn't land that like we needed to," he told investors. "And so that's what we're in the midst of getting resolved right now and through testing."”
- SupportedThe comments came a day after the US midterms, where affordability concerns took centre stage.Moneywatch - CBSNews.com: “His comments come the day after the U.S. midterms, where affordability concerns took center stage.”
- SupportedGasoline prices had risen 38% since the start of the war in Iran, according to AAA data.Moneywatch - CBSNews.com: “bringing down gasoline prices, which have risen 38% since the start of the war in Iran, according to AAA data.”
- SupportedLower-income consumers are particularly strained because a larger share of their income goes to expenses such as gas.Moneywatch - CBSNews.com: “lower-income consumers are feeling particularly strapped, as a larger share of their income goes toward expenses like gas.”
- SupportedRyan Sweet, chief global economist at Oxford Economics, said at a Wednesday event in New York City that low-income consumers are disproportionately feeling the effect of higher food and gasoline prices.Moneywatch - CBSNews.com: “Low-income consumers "are disproportionately feeling the effect of higher food and gasoline prices," Ryan Sweet, chief global economist at Oxford Economics, said on Wednesday during an event in New York City.”
